UPDATE 2-Man Group sells Lehman exposure for $456 mln

* Sells legal claims at 32 pct premium

* Proceeds to boost Man cash position

* Shares up 0.1 percent

By Sinead Cruise

LONDON, Nov 16 Hedge fund manager Man Group
has sold claims to the estate of defunct U.S. investment
bank Lehman Brothers in a $456 million deal that will boost its
cash position and see it book a tidy gain.

Hutchinson Investors, managed by hedge fund firm Baupost
Group, is buying the portfolio at a 32 percent premium to its
June 30 valuation, Man said on Friday.

Man acquired the claims for $355 million in July 2011 from
funds managed by its GLG Partners subsidiary. It has never
disclosed the size of the original claims. GLG was one of
hundreds of hedge fund and asset managers which had outstanding
trades with Lehman that collapsed along with the bank in 2008.

Besides sparing GLG's investors uncertainty and possible
losses while lawyers pursued compensation, Man spotted an
opportunity to profit from a burgeoning secondary market in the
legal exposures as investors took out bets on the likelihood
claims would be paid out, and by how much.

PricewaterhouseCoopers, the administrator in charge of
unwinding the estate of Lehman Brother's British arm said last
week a first tranche of payouts totalling 1.76 billion pounds
($2.8 billion) would be made to unsecured creditors this month.

While these payouts reflect settlements of 25.2 pence in the
pound, speculators and specialist distressed asset funds are
betting the typical payout level may rise as more of Lehman's
multi-billion dollar estate is settled.

The payments may rise or fall depending on settlements
achieved in other parts of the Lehman business and how well
administrators market and offload the bank's assets, a process
which could be affected by economic stress and market movements.

In June 2011, Lehman proposed a plan it touted as a "global
compromise," estimating about $65 billion in total payback and
giving many creditors recoveries of 20-30 cents on the dollar.

Creditors of Lehman's parent have been projected to recover
about 21 cents on the dollar, while derivatives creditors, such
as Goldman Sachs, will get about 28 cents.

Man may receive a further $5 million from Hutchinson
Investors if future recoveries from the claims exceed certain
thresholds. Boston-based Baupost is run by Seth Klarman, widely
followed in the investment community as a deep-value investor
known for the originality of his securities selection.

PROFIT

The sale generates around $100 million post-tax profit for
Man and frees up regulatory capital that had been posted against
the group's liabilities. As a result, Man's regulatory capital
surplus has grown by $140 million.

It follows a challenging period for Man Group which suffered
a fifth straight month of client exits in October after poor
returns from its flagship AHL fund.

In an effort to reverse its fortunes, the company has made a
raft of changes: slashing costs, revamping its dividend policy,
launching new funds and naming Jonathan Sorrell, son of WPP
chief executive Martin Sorrell, as finance director.

Man Group shares, which have lost nearly three quarters of
their value since the start of 2011, were up 0.1 percent at 73.8
pence by 1200 GMT.

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